Not Everyone Can Run Elon Musk’s Playbook

If anything, Musk’s letter actually underscores the need for a cohesive patent strategy at the outset, when large competitors can easily copy your efforts...

When Tesla Motors CEO Elon Musk announced last week that that the company would “not initiate patent lawsuits against anyone who, in good faith, wants to use [Tesla’s] technology,” some quarters were quick to criticize the move as short-sighted, while others praised it as a welcome relief from the “intellectual property landmines” Musk spoke of. But let’s assume that this move is ultimately in Tesla’s best interest (a safe bet, given Musk’s track record). What does this mean for the typical patent strategist or entrepreneur?

Not a whole lot, unfortunately, unless you find yourself similarly situated as Tesla -- in which case, congratulations! If anything, Musk’s letter actually underscores the need for a cohesive patent strategy at the outset, when large competitors can easily copy your efforts.

Despite Musk’s earlier reservations about the patent system after Zip2, he nevertheless felt it prudent to seek patent protection at Tesla in order to protect the fledgling company’s investments. This was, and still is, a crucial early step, particularly in fields where your inventions can be readily copied. For a start-up, these inventions can represent the company’s entire opportunity for monetization, and being copied by an established competitor can quickly put you out of business.

With the benefit of hindsight, Musk notes that their competitors did not attempt to copy Tesla’s technology, and concludes the creation of a patent portfolio was unnecessary. But companies like i4i can tell a different story, one where blatant copying by Microsoft of their patented technology landed both parties in the U.S. Supreme Court. Musk pitches the move as altruistic (for great justice). One is left to wonder how altruistic Musk would have felt if a competitor had actually copied the technology from the outset and put Tesla out of business.

A Tesla Model S is more than just the sum of patented parts.

Tesla is uniquely positioned to reap the benefits of its open patent license, including standardization around its product lines. But even at the glacial pace of the automotive industry, not all once-successful entrants could engage in an open patent approach and remain successful. The automotive industry consists of myriad specialized parts makers who develop cutting-edge transmissions, brake systems, and other parts used across vehicles of all makes and models (and yes, batteries – where Tesla now has the manufacturing muscle to compete even without patents).

A Tesla Model S is more than just the sum of patented parts. Any gearhead will tell you a good car has a soul. But a transmission or a back-up sensor usually does not evoke that same passion or customer loyalty on its own. Tesla can eschew patents now because of the reputation it has built, an opportunity it might not have had without the help of patents. Patent strategists will need to appreciate whether their protected products have the qualities of a high-profile performance sedan, or those of a dutiful transmission hidden away in the bowels of the vehicle, before considering the effects of a similar open patent license.

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[Salvador M. Bezosis a director in Sterne, Kessler, Goldstein & Fox P.L.L.C.'s Electronics Group where he provides services in the preparation and prosecution of patent applications before the United States Patent & Trademark Office.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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